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Taking Stock of Hotel Investment & Development in German-Speaking Markets operators. “In Germany, Austria and Switzerland, IHG had another record year in development,” said Martin Bowen, Associate Vice President Development Germany of InterConti- nental Hotels Group; this was mainly driven by new developments concluded by IHG’s multi-development agreement (MDA) partners. Among them were two multi-brand projects with Holiday Inn Express and Holiday Inn, an increasing trend. Project devel- opers/owners are shifting the risk: they no longer want 400 rooms of one brand at one location, but rather 200 Holiday Inn Express rooms and 200 Holiday Inn rooms. “Our strategy with framework agree- ments and multiple partners has proved success- ful,” said Bowen. “An increasing number of our franchise part- ners are now bankable and concerning openings, 2017 will be a new record year in Germany. Most project devel- opments are placed individually in the market by the respective developer, most often as a forward deal. The investors were diverse, among them insurances, family offices and public funds.” LARGE INSTITUTIONAL INVESTORS FINALLY WITHOUT FEAR In 2016, large institutional investors finally lost their fear of the hotel asset class. The reports about their purchases accumulated: from the young Art-Invest Real Estate over Deka Immobilien to large names such as the Patrizia Group from Augs- burg, a multi-billion-dollar player in housing construction with a growing interest in the hotel industry. In its hotel branch, the group supervises property assets worth about €650 million. In 2016, Patrizia acquired a total of 10 hotels, all of them in Germany. In 2015, there were four. There were no sales. Among the hotels and project developments were/are, amongst others, the Holiday Inn Express Augsburg, Germany’s first Super 8 Hotel in Munich, the project of the lifestyle brand Ruby with 289 rooms in the city of Hamburg (opening at the end of 2017), as well as the project 25hours Hotels Duesseldorf (opening in 2018). Hotels, often part of a mixed-use development, will be part of a new, second real estate fund for private investors, initiated by Patrizia AG last year. A pioneer among the institutional investors in Germany is Union Invest- ment Real Estate. Many years ago, it set up the first pure hotel fund and developed a fast interest in budget hotels, too. Its figures remain impres- sive: In the last three years, it bought hotels for €1.458 billion. About €700 million contributed to this figure in 2016, spread over seven individual transactions: two in the U.S. and five in Germany. Other hotel operators, that were reluctant for years, became increas- ingly daring. Invesco Real Estate announced after its super deal with the Scandinavian Pandox owner- operator in November 2016 that it no longer wished to invest in four- star business hotels only, but maybe also in promising segments, such as extended stay or design/lifestyle hotels. OPERATORS PART OF TRANSACTION Lifestyle and budget concepts have become increasingly popular. Therefore, operators and owners/ financiers are moving closer together in this segment. This way, operating companies are becoming “part of the transaction” and important partners in the context of real estate deals. Just a few years ago, owners and operators rarely fed each other lines. Today, the operator’s solvency and the power of the brand concept also have a say in the transaction sums. The demand for budget properties is very dynamic: “Nearly every day, I get a call about the sale of a property,” Max C. Luscher, who succeeded Mark Thompson as Managing Director at B&B Hotels Germany on January 1, 2017, said. “In 2016, we opened nine new hotels, but significantly more hotels or projects were sold in Germany; my estimation is about 15 properties.” Just before the end of the year, five B&B hotels alone changed owners—in Berlin, Stuttgart, Wupper- tal, Dortmund and Krefeld. As part of a forward deal, List Retail Development GmbH & Co. KG sold the portfolio for 5 OPENING 2017 Super 8 Hotel Munich OPENING 2018 25Hours Hotel Duesseldorf HOSPITALITY INSIDE | IHIFPDF Image | Burgenstock Taking Stock of Hotel Investment
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